Netflix in the Spotlight

Netflix just can't stay out of the spotlight-such is the plight of a company whose stock is up 106 percent in the past 12 months and whose technology could pose a major threat to satellite and cable TV operators, not to mention TV networks.

Now it's in the midst of a battle between a content company and a cable channel, which raises lots of questions about digital distribution and Netflix's future.

Today Comcast CEO Brian Roberts said "The jury is out" whether Netflix will drive "cord cutting," saying that initial fears might have been overblown. Speaking at a Fortune Magazine breakfast, Roberts revealed that Netflix is really a "frenemy" of Comcast's: while we're waiting to see if it drives people to drop their cable subscription, the streaming video is great for Comcast's broadband business, which is booming. Plus, now that Comcast owns NBC Universal, CNBC's parent, Netflix pays the content company licensing fees for its library.

Netflix responded to Roberts comments, supporting his idea that he shouldn't view Netflix as a threat. A spokesperson tells me Netflix has always considered itself a "complement to cable." It's "rich catalog" of movies is a complement to the live events like the Superbowl and big reality TV shows like American Idol that Comcast can deliver.

But a new study from a firm called the Diffusion Group finds that 32 percent of Netflix subscribers say they plan to downgrade or cancel their cable TV services, double the percentage last year. But those numbers are a bit deceiving: those numbers are just intention, not action, and in the most recent quarter Comcast subscriber numbers held up better than expected. And only about 7 percent of those surveyed cited Netflix as a reason why they'd cut the cord.

Bottom line: this isn't a huge immediate threat to the TV subscription business,

Right now Netflix's catalog is suffering- subscribers haven't been able to stream Sony movies for five days now. Netflix's streaming library is the collateral damage of a battle between Sony and Starz . Starz distributes Sony movies, along with Disney films , on cable as well as to outlets like Netflix, but the terms of Sony's Starz contract say that once Netflix's streaming service hits a certain number of subscribers Starz can no longer offer Sony movies.

If it drags out much longer, then we could see it start to take a toll on Netflix's subscriber base. Sony accounts for 12 percent of the US box office and is one of Netflix's single largest sources of films. Janney Montgomery Scott analyst Tony Wible says he doesn't expect this to immediately impact Netflix's earnings, but says it could drive "churn" -- the number of customers who drop the service. Now the clock is ticking for Sony and Starz to resolve their standoff. Will Starz pay Sony more money so it can continue offering its films on Netflix streaming? Netflix's contract with Starz is up for renewal in the first quarter of next year, but this could push a renewal at much *higher terms* for Starz soon - so Starz can pay higher fees for Sony. Or, will this drive Starz in a different direction, to make a deal with the rival service Amazon is starting?

This whole contract conflict speaks to just how complicated the relationship is between four constituents: 1) Netflix, 2) cable channels - like Starz, 3) cable carriers like Comcast, which deliver those channels for a fee, and 4) the content creators, like Sony.